AWS now 10X the size of its competitors: Is the cloud arms race over?

What a difference a year makes in cloud cuckoo land!

Despite increased traction from Microsoft Azure, punishing price reductions from Google, and a lot of wishful thinking from most everywhere else, Amazon Web Services (AWS) has managed to double its lead against its Infrastructure-as-a-Service (IaaS) competitors.

That's right, double it.

While Gartner found that AWS had 5X the utilized capacity of its next nearest 14 competitors combined, in 2015 the venerable analyst firm finds that number has exploded to 10X.

Is this cloud arms race already over?

Hegemony by any other name... 

There are at least two ways to look the cloud race, and both favor AWS. The first is to take Gartner's Magic Quadrant (MQ) for IaaS, which incorporates a range of attributes (ability to execute, etc.) to come up with a composite score that evaluates the strength of different cloud vendors.

It's not surprising to see AWS dominate the IaaS market. But it is, perhaps, surprising to see just how dominant it is, given the progress Microsoft Azure has made over the past year, in particular (Figure A).

is founded on a mix of technology innovation and business execution.

As Gartner finds, "AWS has a diverse customer base and the broadest range of use cases, including enterprise and mission-critical applications....[It has] attract[ed] a very large technology partner ecosystem that includes software vendors that have licensed and packaged their software to run on AWS, as well as many vendors that have integrated their software with AWS capabilities."

On one hand, AWS' investment in core infrastructure helps it drive "relentless economies of scale," borrowing Redmonk analyst Stephen O'Grady's phrase, but those same economies of scale, or network effects, are pushing it forward in terms of its business ecosystem.

The big get bigger 

As useful as the MQ is, another way to measure AWS' lead is by adoption. And in this category, AWS blows everyone else away.

According to Gartner, while in 2014 AWS offered 5X the utilized cloud capacity of its next nearest 14 competitors combined, in 2015 AWS delivers over 10X the utilized cloud capacity of its largest 14 competitors combined.

If ever there was hegemony, this is it.

AWS dominance doesn't derive from low-balling its competitors, either. As shown in its latest earnings call, AWS is highly profitable, even despite multitudinous price reductions over the years.

No, AWS dominates because it innovates, as Gartner notes:

AWS is a thought leader; it is extraordinarily innovative, exceptionally agile, and very responsive to the market. It has the richest array of IaaS features and PaaS-like capabilities. It continues to rapidly expand its service offerings and offer higher-level solutions. Although it is beginning to face more competition from Microsoft and Google, it retains a multiyear competitive advantage.

In this way, AWS has become the "safe choice," declares Gartner, which suggests dominance for many years to come as enterprises find their way to the cloud. Years ago Microsoft achieved this same dominance on the desktop. Apparently there's something in the water in Seattle.

Can anyone catch up? 

Gartner pegs AWS' lead at multiple years. But Microsoft, in particular, isn't sitting still.

According to Gartner, Microsoft's utilized compute capacity is twice as big as the next 12 competitors combined. That's significant.

As much as companies go with AWS to build the future, they're trying Microsoft Azure to bridge their past infrastructure investments to the future. As Gartner highlights, "Microsoft Azure encompasses integrated IaaS and PaaS components that operate and feel like a unified whole. Microsoft has been rapidly rolling out new features and services, including differentiated capabilities."

In other words, "It has a vision of infrastructure and platform services that are not only leading stand-alone offerings, but also seamlessly extend and interoperate with on-premises Microsoft infrastructure (rooted in Hyper-V, Windows Server, Active Directory and System Center), development tools (including Visual Studio and Team Foundation Server), and applications, as well as Microsoft's SaaS offerings." That's a compelling vision for many Microsoft shops.

Still, Microsoft has a long way to go. Ditto Google. But at least they're in the same universe.

For everyone that isn't AWS, Microsoft, or Google, which dominate the cloud IaaS market, cloud life looks like a rounding error, with no clear differentiation to help them catch up.

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